By Kabelo Dlothi, Director, Co-Head of Corporate & Commercial, and Mankope Malebye, Associate at CMS South Africa
Africa possesses the essential ingredients to become a global manufacturing powerhouse: a young workforce, abundant natural resources, and expanding consumer markets. Yet, persistent challenges – unreliable infrastructure, energy shortages, and limited capital – continue to stifle industrial growth at a time when the continent’s potential has never been greater.
While some economies have successfully expanded their manufacturing bases, others face deindustrialisation pressures driven by rising costs and limited investment. These multifaceted obstacles demand a robust solution. Public-Private Partnerships (PPPs), while not a panacea, are increasingly vital mechanisms for addressing the infrastructure and investment deficits constraining industrial progress. When structured correctly, PPPs allow governments and private partners to share responsibilities, expertise, and risks to achieve successful long-term outcomes.
Powering and connecting industry
Unreliable power and high energy costs represent major barriers, inflating operational expenses and disrupting production. Similarly, poor logistics – dilapidated roads, inefficient ports, and unreliable rail networks – create significant transport inefficiencies. However, specific pockets of excellence demonstrate how PPPs can effectively mitigate these challenges.
Kenya’s $600 million Nairobi Expressway illustrates how PPPs can accelerate strategic transport infrastructure, dramatically improving connectivity between economic centres. Another example is the Lobito Corridor, spanning Angola, the DRC, and Zambia. By upgrading regional transport links, this initiative shows how coordinated public and private investment supports trade and regional integration.
In the energy sector, South Africa’s Kathu Solar Park provides clean electricity to approximately 179,000 homes. This bolsters energy security and diversifies the energy mix, directly addressing the manufacturer’s need for stable, affordable power. With the implementation of the African Continental Free Trade Area (AfCFTA), efficient logistics and reliable energy will become even more critical drivers of regional competitiveness.
Mobilising capital, de-risking investment
Africa’s manufacturing sector requires over $50 billion in annual investment to meet industrialisation goals, yet faces a financing gap of $20–$25 billion. Furthermore, SMEs – accounting for 90% of businesses – receive less than 20% of commercial financing. PPPs are crucial for mobilising the resources required for large-scale development and for shaping broader industrial ecosystems, including industrial parks and manufacturing clusters.
By leveraging private sector capital, PPPs attract both domestic and foreign investment. Innovative financing instruments within these frameworks include:
- Blended finance: Combining public and private funding, using concessional finance from DFIs to absorb risks and attract private investors.
- Infrastructure bonds: Structured with credit enhancements or government guarantees, these draw institutional investors seeking stable, long-term returns.
- Sovereign wealth and pension funds: Significant capital pools with long investment horizons ideally suited for infrastructure financing.
Investors are also prioritising Environmental, Social, and Governance (ESG) outcomes. PPPs that contribute to sustainable infrastructure and skills transfer are increasingly attractive to development finance institutions.
Encouragingly, African governments are refining procurement processes to facilitate private-sector participation. Improved project preparation and regulatory certainty will be key to attracting the “patient capital” necessary for long-gestation industrial investments. PPPs fundamentally alter the risk-reward profile, making essential projects bankable.
A sustainable industrial future
Africa’s manufacturing sector faces systemic hurdles, but PPPs offer a vital strategy for industrial renaissance. By delivering energy and transport infrastructure, mobilising investment, and facilitating technology transfer, successful partnerships strengthen the foundations of growth.
However, the full potential of PPPs relies on sustained commitment to robust governance, transparent regulations, and capacity building. Prioritising bankability, promoting local content, and fostering integration through the AfCFTA are indispensable for the long-term success and inclusivity of these partnerships.